Variable Interest Entities

3 Months Ended

Feb. 28, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company evaluated the agreements of its joint ventures that were formed or that had reconsideration events during the three months ended February 28, 2018. Based on the Company's evaluation, during the three months ended February 28, 2018, the Company consolidated a VIE that had an immaterial amount of combined assets and liabilities. During the three months ended February 28, 2018, there were no VIEs that were deconsolidated.

The Company’s recorded investments in unconsolidated entities were as follows:



(In thousands)	February 28, 2018		November 30, 2017
Lennar Homebuilding	$	990,723	900,769
Rialto	$	275,850	265,418
Lennar Multifamily	$	437,367	407,544

Consolidated VIEs

As of February 28, 2018, the carrying amounts of the VIEs’ assets and non-recourse liabilities that consolidated were $864.8 million and $366.0 million, respectively. As of November 30, 2017, the carrying amounts of the VIEs’ assets and non-recourse liabilities that consolidated were $799.4 million and $389.7 million, respectively. Those assets are owned by, and those liabilities are obligations of, the VIEs, not the Company.

A VIE’s assets can only be used to settle obligations of that VIE. The VIEs are not guarantors of the Company’s senior notes or other debts payable. The assets held by a VIE usually are collateral for that VIE’s debt. The Company and other partners do not generally have an obligation to make capital contributions to a VIE unless the Company and/or the other partner(s) have entered into debt guarantees with a VIE’s banks. Other than debt guarantee agreements with a VIE’s banks, there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to provide financial support to a VIE. While the Company has option contracts to purchase land from certain of its VIEs, the Company is not required to purchase the assets and could walk away from the contracts.

Unconsolidated VIEs

The Company’s recorded investments in VIEs that are unconsolidated and its estimated maximum exposure to loss were as follows:

As of February 28, 2018



(In thousands)	Investments in Unconsolidated VIEs		Lennar’s Maximum Exposure to Loss
Lennar Homebuilding (1)	$	48,792	117,516
Rialto (2)	210,882		210,882
Lennar Multifamily (3)	371,916		498,450
	$	631,590	826,848

As of November 30, 2017



(In thousands)	Investments in Unconsolidated VIEs		Lennar’s Maximum Exposure to Loss
Lennar Homebuilding (1)	$	181,804	248,909
Rialto (2)	179,659		179,659
Lennar Multifamily (3)	345,175		503,364
	$	706,638	931,932


(1)	As of both February 28, 2018 and November 30, 2017, the maximum exposure to loss of Lennar Homebuilding’s investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to repayment guarantees of unconsolidated entities' debt of $62.5 million and $61.6 million, respectively.

(2)

As of both February 28, 2018 and November 30, 2017, the maximum recourse exposure to loss of Rialto’s investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs. As of February 28, 2018 and November 30, 2017, investments in unconsolidated VIEs and Lennar’s maximum exposure to loss included $210.9 million and $179.7 million, respectively, related to Rialto’s investments held-to-maturity.

(3)

As of February 28, 2018 and November 30, 2017, the remaining equity commitment of $121.6 million and $153.3 million, respectively, to fund the Venture for future expenditures related to the construction and development of its projects is included in Lennar's maximum exposure to loss. In addition, as of February 28, 2018 and November 30, 2017, the maximum exposure to loss of Lennar Multifamily's investments in unconsolidated VIEs was limited to its investments in the unconsolidated VIEs, except with regard to $4.6 million and $4.6 million, respectively, of letters of credit outstanding for certain of the unconsolidated VIEs that could be drawn upon in the event of default under their debt agreements.

While these entities are VIEs, the Company has determined that the power to direct the activities of the VIEs that most significantly impact the VIEs’ economic performance is generally shared. While the Company generally manages the day-to-day operations of the VIEs, each of these VIEs has an executive committee made up of representatives from each partner. The members of the executive committee have equal votes and major decisions require unanimous consent and approval from all members. The Company does not have the unilateral ability to exercise participating voting rights without partner consent.

As of February 28, 2018, the Company and other partners did not have an obligation to make capital contributions to the VIEs, except for $121.6 million remaining equity commitment to fund the Venture for future expenditures related to the construction and development of the projects and $4.6 million of letters of credit outstanding for certain Lennar Multifamily unconsolidated VIEs that could be drawn upon in the event of default under their debt agreements. In addition, there are no liquidity arrangements or agreements to fund capital or purchase assets that could require the Company to provide financial support to the VIEs, except with regard to $62.5 million repayment guarantees of two unconsolidated entities' debt. Except for the unconsolidated VIEs discussed above, the Company and the other partners did not guarantee any debt of the other unconsolidated VIEs. While the Company has option contracts to purchase land from certain of its unconsolidated VIEs, the Company is not required to purchase the assets and could walk away from the contracts.

Option Contracts

The Company has access to land through option contracts, which generally enables it to control portions of properties owned by third parties (including land funds) and unconsolidated entities until the Company has determined whether to exercise the option.

The Company evaluates all option contracts for land to determine whether they are VIEs and, if so, whether the Company is the primary beneficiary of certain of these option contracts. Although the Company does not have legal title to the optioned land, if the Company is deemed to be the primary beneficiary or makes a significant deposit for optioned land, it may need to consolidate the land under option at the purchase price of the optioned land.

During the three months ended February 28, 2018, consolidated inventory not owned decreased by $26.6 million with a corresponding decrease to liabilities related to consolidated inventory not owned in the accompanying condensed consolidated balance sheet as of February 28, 2018. The decrease was primarily due to a higher amount of homesite takedowns than construction started on homesites not owned. To reflect the purchase price of the inventory consolidated, the Company had a net reclass related to option deposits from consolidated inventory not owned to land under development in the accompanying condensed consolidated balance sheet as of February 28, 2018. The liabilities related to consolidated inventory not owned primarily represent the difference between the option exercise prices for the optioned land and the Company’s cash deposits.

The Company’s exposure to loss related to its option contracts with third parties and unconsolidated entities consisted of its non-refundable option deposits and pre-acquisition costs totaling $202.4 million and $137.0 million at February 28, 2018 and November 30, 2017, respectively. Additionally, the Company had posted $46.9 million and $51.8 million of letters of credit in lieu of cash deposits under certain land and option contracts as of February 28, 2018 and November 30, 2017, respectively.